Last year alone, the average homeowner paid £3,154 in interest on their mortgage according to estimates from the HomeOwners Alliance – imagine if there was a way to repay your mortgage early and save thousands of pounds in the process. And it’s not just about making overpayments, savvy Britons are taking simple steps to pay as little interest on their homes as possible.
According to the Council of Mortgage Lenders, the average mortgage debt in the UK is £123,000, which only looks set to soar as property prices rise.
However, repaying a mortgage for 25 years is not set in stone and one way that more and more people are paying less interest is by making overpayments on their loan every year.
It’s an effective method – 39-year-old Becky Derbyshire told Express.co.uk that her and her husband are mortgage-free – and it took them less than ten years.
The couple completely paid off their £120k mortgage earlier this year and Becky says she wishes she’d started earlier after feeling ‘a huge sense of relief’.
However, as well as making overpayments every year, a few other simple steps could also help people become mortgage free.
On its website the HomeOwners Alliance said: “If you have a £200,000 mortgage and £25,000 in a linked savings account, you’ll only pay mortgage interest on £175,000.
“On a 2.5 percent mortgage interest rate you’d save £19,000 in interest. You would also repay your mortgage two years early. So well worth considering!”
Some banks and mortgage lenders have handy overpayment calculators that could help people get started, which is how Ms Derbyshire began her debt free journey.
She explained: “I set up a savings account just for this purpose and we lived off my husband’s wage – putting every spare bit of cash away.
Although becoming mortgage-free isn’t easy, it is possible, and Becky shared some tips for other looking to do the same:
- People are never too old to start overpaying on your mortgage, start now
- Put whatever spare money one has – whether it’s just £10 or £50 a month into a separate savings account for this purpose (it won’t be missed if it’s not there)
- After six months use the money to pay off a lump sum from one’s mortgage
- Check online to see if a person’s bank has a mortgage overpayment calculator